FORM 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-Q

 

 

 

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2012

Commission File Number: 001-34084

 

 

POPULAR, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Puerto Rico    66-0667416

(State or other jurisdiction of

Incorporation or organization)

  

(IRS Employer

Identification Number)

Popular Center Building

209 Muñoz Rivera Avenue

Hato Rey, Puerto Rico

   00918
(Address of principal executive offices)    (Zip code)

(787) 765-9800

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name, former address and former fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer, large accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, $0.01 par value, 103,105,983 shares outstanding as of October 31, 2012.

 

 

 


Table of Contents

POPULAR, INC.

INDEX

 

   

Page

Part I – Financial Information

 

Item 1. Financial Statements

 

Unaudited Consolidated Statements of Financial Condition at September 30, 2012 and December  31, 2011

  4

Unaudited Consolidated Statements of Operations for the quarters and nine months ended September  30, 2012 and 2011

  5

Unaudited Consolidated Statements of Comprehensive Income for the quarters and nine months ended September 30, 2012 and 2011

  6

Unaudited Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2012 and 2011

  7

Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011

  8

Notes to Unaudited Consolidated Financial Statements

  9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

  126

Item 3. Quantitative and Qualitative Disclosures about Market Risk

  193

Item 4. Controls and Procedures

  193

Part II – Other Information

 

Item 1. Legal Proceedings

  193

Item 1A. Risk Factors

  193

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

  194

Item 6. Exhibits

  195

Signatures

  196

 

2


Table of Contents

Forward-Looking Information

The information included in this Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may relate to Popular, Inc.’s (the “Corporation”, “Popular”, “we, “us”, “our”) financial condition, results of operations, plans, objectives, future performance and business, including, but not limited to, statements with respect to the adequacy of the allowance for loan losses, delinquency trends, market risk and the impact of interest rate changes, capital markets conditions, capital adequacy and liquidity, and the effect of legal proceedings and new accounting standards on the Corporation’s financial condition and results of operations. All statements contained herein that are not clearly historical in nature are forward-looking, and the words “anticipate,” “believe,” “continues,” “expect,” “estimate,” “intend,” “project” and similar expressions and future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may,” or similar expressions are generally intended to identify forward-looking statements.

These statements are not guarantees of future performance and involve certain risks, uncertainties, estimates and assumptions by management that are difficult to predict.

Various factors, some of which are beyond Popular’s control, could cause actual results to differ materially from those expressed in, or implied by, such forward-looking statements. Factors that might cause such a difference include, but are not limited to:

 

   

the rate of growth in the economy and employment levels, as well as general business and economic conditions;

 

   

changes in interest rates, as well as the magnitude of such changes;

 

   

the fiscal and monetary policies of the federal government and its agencies;

 

   

changes in federal bank regulatory and supervisory policies, including required levels of capital and the impact of proposed capital standards on our capital ratios;

 

   

the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) on our businesses, business practices and cost of operations;

 

   

regulatory approvals that may be necessary to undertake certain actions or consummate strategic transactions such as acquisitions and dispositions;

 

   

the relative strength or weakness of the consumer and commercial credit sectors and of the real estate markets in Puerto Rico and the other markets in which borrowers are located;

 

   

the performance of the stock and bond markets;

 

   

competition in the financial services industry;

 

   

additional Federal Deposit Insurance Corporation (“FDIC”) assessments; and

 

   

possible legislative, tax or regulatory changes.

Other possible events or factors that could cause results or performance to differ materially from those expressed in these forward-looking statements include the following: negative economic conditions that adversely affect the general economy, housing prices, the job market, consumer confidence and spending habits which may affect, among other things, the level of non-performing assets, charge-offs and provision expense; changes in interest rates and market liquidity which may reduce interest margins, impact funding sources and affect our ability to originate and distribute financial products in the primary and secondary markets; adverse movements and volatility in debt and equity capital markets; changes in market rates and prices which may adversely impact the value of financial assets and liabilities; liabilities resulting from litigation and regulatory investigations; changes in accounting standards, rules and interpretations; increased competition; our ability to grow our core businesses; decisions to downsize, sell or close units or otherwise change our business mix; and management’s ability to identify and manage these and other risks. Moreover, the outcome of legal proceedings, as discussed in “Part II, Item I. Legal Proceedings,” is inherently uncertain and depends on judicial interpretations of law and the findings of regulators, judges and juries. Investors should refer to the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2011 as well as “Part II, Item 1A” of this Form 10-Q for a discussion of such factors and certain risks and uncertainties to which the Corporation is subject.

All forward-looking statements included in this document are based upon information available to the Corporation as of the date of this document, and other than as required by law, including the requirements of applicable securities laws, we assume no obligation to update or revise any such forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

 

3


Table of Contents

POPULAR, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(UNAUDITED)

 

(In thousands, except share information)

   September 30, 2012     December 31, 2011  

Assets:

    

Cash and due from banks

   $ 477,342     $ 535,282  
  

 

 

   

 

 

 

Money market investments:

    

Federal funds sold

     38,358       75,000  

Securities purchased under agreements to resell

     240,761       252,668  

Time deposits with other banks

     646,544       1,048,506  
  

 

 

   

 

 

 

Total money market investments

     925,663       1,376,174  
  

 

 

   

 

 

 

Trading account securities, at fair value:

    

Pledged securities with creditors’ right to repledge

     181,133       402,591  

Other trading securities

     45,785       33,740  

Investment securities available-for-sale, at fair value:

    

Pledged securities with creditors’ right to repledge

     1,464,402       1,737,868  

Other investment securities available-for-sale

     3,655,899       3,271,955  

Investment securities held-to-maturity, at amortized cost (fair value at September 30, 2012—$124,102; December 31, 2011—$125,254)

     122,072       125,383  

Other investment securities, at lower of cost or realizable value (realizable value at September 30, 2012 - $215,140; December 31, 2011—$181,583)

     213,389       179,880  

Loans held-for-sale, at lower of cost or fair value

     337,049       363,093  
  

 

 

   

 

 

 

Loans held-in-portfolio:

    

Loans not covered under loss sharing agreements with the FDIC

     20,851,108       20,703,192  

Loans covered under loss sharing agreements with the FDIC

     3,903,867       4,348,703  

Less – Unearned income

     97,255       100,596  

Allowance for loan losses

     761,172       815,308  
  

 

 

   

 

 

 

Total loans held-in-portfolio, net

     23,896,548       24,135,991  
  

 

 

   

 

 

 

FDIC loss share asset

     1,559,057       1,915,128  

Premises and equipment, net

     525,733       538,486  

Other real estate not covered under loss sharing agreements with the FDIC

     252,024       172,497  

Other real estate covered under loss sharing agreements with the FDIC

     125,514       109,135  

Accrued income receivable

     133,943       125,209  

Mortgage servicing assets, at fair value

     158,367       151,323  

Other assets

     1,724,927       1,462,393  

Goodwill

     647,757       648,350  

Other intangible assets

     56,762       63,954  
  

 

 

   

 

 

 

Total assets

   $ 36,503,366     $ 37,348,432  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Liabilities:

    

Deposits:

    

Non-interest bearing

   $ 5,404,470     $ 5,655,474  

Interest bearing

     20,915,029       22,286,653  
  

 

 

   

 

 

 

Total deposits

     26,319,499       27,942,127  
  

 

 

   

 

 

 

Assets sold under agreements to repurchase

     1,944,564       2,141,097  

Other short-term borrowings

     1,206,200       296,200  

Notes payable

     1,866,377       1,856,372  

Other liabilities

     1,097,742       1,193,883  
  

 

 

   

 

 

 

Total liabilities

     32,434,382       33,429,679  
  

 

 

   

 

 

 

Commitments and contingencies (See Note 19)

    

Stockholders’ equity:

    

Preferred stock, 30,000,000 shares authorized; 2,006,391 shares issued and outstanding

     50,160       50,160  

Common stock, $0.01 par value; 170,000,000 shares authorized;

    

103,112,305 shares issued at September 30, 2012 (December 31, 2011 – 102,634,640) and 103,097,143 shares outstanding (December 31, 2011 – 102,590,457)

     1,031       1,026  

Surplus

     4,131,681       4,123,898  

Accumulated deficit

     (54,183     (212,726

Treasury stock – at cost, 15,162 shares at September 30, 2012 (December 31, 2011 – 44,183)

     (270     (1,057

Accumulated other comprehensive loss, net of tax

     (59,435     (42,548
  

 

 

   

 

 

 

Total stockholders’ equity

     4,068,984       3,918,753  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 36,503,366     $ 37,348,432  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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Table of Contents

POPULAR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

     Quarter ended September 30,     Nine months ended September 30,  

(In thousands, except per share information)

   2012     2011     2012     2011  

Interest income:

        

Loans

   $ 387,381     $ 428,999     $ 1,164,665     $ 1,294,834  

Money market investments

     862       886       2,774       2,759  

Investment securities

     39,945       51,085       128,828       157,183  

Trading account securities

     5,815       10,788       17,669       29,332  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

     434,003       491,758       1,313,936       1,484,108  
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest expense:

        

Deposits

     43,000       65,868       143,193       213,419  

Short-term borrowings

     9,876       13,744       36,503       41,478  

Long-term debt

     37,701       42,835       112,032       141,999  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

     90,577       122,447       291,728       396,896  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     343,426       369,311       1,022,208       1,087,212  

Provision for loan losses—non-covered loans

     83,589       150,703       247,846       306,177  

Provision for loan losses—covered loans

     22,619       25,573       78,284       89,735  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income after provision for loan losses

     237,218       193,035       696,078       691,300  
  

 

 

   

 

 

   

 

 

   

 

 

 

Service charges on deposit accounts

     45,858       46,346       138,577       138,778  

Other service fees

     64,784       62,664       192,850       179,623  

Net gain (loss) on sale and valuation adjustments of investment securities

     64       8,134       (285     8,044  

Trading account (loss) profit

     (2,266     2,912       (11,692     3,287  

Net gain on sale of loans, including valuation adjustments on loans held-for-sale

     18,495       20,294       18,569       14,756  

Adjustments (expense) to indemnity reserves on loans sold

     (8,717     (10,285     (17,990     (29,587

FDIC loss share (expense) income

     (6,707     (5,361     (19,387     49,344  

Fair value change in equity appreciation instrument

     —          —          —          8,323  

Other operating income

     4,198       (2,314     32,699       38,350  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total non-interest income

     115,709       122,390       333,341       410,918  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Personnel costs

     111,550       111,724       349,377       328,823  

Net occupancy expenses

     24,409       25,885       73,534       76,428  

Equipment expenses

     11,447       10,517       33,688       33,314  

Other taxes

     12,666       12,391       38,178       38,986  

Professional fees

     53,412       48,756       153,644       144,923  

Communications

     6,500       6,800       20,276       21,198  

Business promotion

     14,924       14,650       44,754       35,842  

FDIC deposit insurance

     24,173       23,285       72,006       68,640  

Loss on early extinguishment of debt

     43       109       25,184       8,637  

Other real estate owned (OREO) expenses

     5,896       3,234       22,441       11,885  

Other operating expenses

     22,854       22,541       73,714       63,555  

Amortization of intangibles

     2,481       2,463       7,605       6,973  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     290,355       282,355       914,401       839,204  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income tax

     62,572       33,070       115,018       263,014  

Income tax expense (benefit)

     15,384       5,537       (46,317     114,664  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

   $ 47,188     $ 27,533     $ 161,335     $ 148,350  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income Applicable to Common Stock

   $ 46,257     $ 26,602     $ 158,543     $ 145,558  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income per Common Share – Basic

   $ 0.45     $ 0.26     $ 1.55     $ 1.42  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net Income per Common Share – Diluted

   $ 0.45     $ 0.26     $ 1.55     $ 1.42  
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends Declared per Common Share

     —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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Table of Contents

POPULAR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

 

     Quarter ended,     Nine months ended,  
     September 30,     September 30,  

(In thousands)

   2012     2011     2012     2011  

Net income

   $ 47,188     $ 27,533     $ 161,335     $ 148,350  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income before tax:

        

Foreign currency translation adjustment

     (120     (222     (1,066     (1,950

Reclassification adjustment for losses included in net income

     —          —          —          10,084  

Adjustment of pension and postretirement benefit plans

     —          —          —          —     

Amortization of net losses

     6,289       3,243       18,868       9,730  

Amortization of prior service cost

     (50     (240     (150     (720

Unrealized holding (losses) gains on securities available-for-sale arising during the period

     (6,567     29,021       (33,022     59,822  

Reclassification adjustment for (gains) losses included in net income

     (64     (8,134     285       (8,044

Unrealized net losses on cash flow hedges

     (6,285     (6,295     (12,612     (9,939

Reclassification adjustment for net losses (gains) included in net income

     3,701       4,139       9,677       7,333  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive (loss) income before tax

     (3,096     21,512       (18,020     66,316  

Income tax benefit (expense)

     244       (708     1,133       (4,780
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive (loss) income, net of tax

     (2,852     20,804       (16,887     61,536  
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income, net of tax

   $ 44,336     $ 48,337     $ 144,448     $ 209,886  
  

 

 

   

 

 

   

 

 

   

 

 

 
Tax effect allocated to each component of other comprehensive (loss) income:     
     Quarter ended     Nine months ended,  
     September 30,     September 30,  

(In thousands)

   2012     2011     2012     2011  

Underfunding of pension and postretirement benefit plans

   $ —        $ —        $ —        $ —     

Amortization of net losses

     (1,740     (965     (5,220     (2,896

Amortization of prior service cost

     15       72       45       216  

Unrealized holding (losses) gains on securities available-for-sale arising during the period

     1,193       (1,611     5,428       (4,101

Reclassification adjustment for (gains) losses included in net income

     —          1,233       —          1,219  

Unrealized net losses on cash flow hedges

     1,886       1,805       3,783       2,982  

Reclassification adjustment for net losses (gains) included in net income

     (1,110     (1,242     (2,903     (2,200
  

 

 

   

 

 

   

 

 

   

 

 

 

Income tax benefit (expense)

   $ 244     $ (708   $ 1,133     $ (4,780
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

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Table of Contents

POPULAR, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

 

    Common     Preferred           Accumulated     Treasury     Accumulated
other
comprehensive
       

(In thousands)

  stock     stock     Surplus     deficit     stock     income (loss)     Total  

Balance at December 31, 2010

  $ 1,023     $ 50,160     $ 4,103,211     $ (347,328)      $ (574)      $ (5,961)      $  3,800,531  

Net income

          148,350           148,350  

Issuance of stock

    2         5,392             5,394  

Dividends declared:

             

Preferred stock

          (2,792         (2,792

Common stock purchases

            (418)          (418)   

Other comprehensive income, net of tax

              61,536       61,536  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2011

  $ 1,025     $ 50,160     $ 4,108,603     $ (201,770)      $ (992)      $ 55,575     $ 4,012,601  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2011

    $1,026     $  50,160     $ 4,123,898     $ (212,726)      $  (1,057)      $ (42,548)      $ 3,918,753  

Net income

          161,335           161,335  

Issuance of stock

    5         7,783             7,788  

Dividends declared:

             

Preferred stock

          (2,792         (2,792

Common stock purchases

            (276)          (276)   

Common stock reissuance

            1,063         1,063  

Other comprehensive loss, net of tax

              (16,887)        (16,887)   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2012

  $ 1,031     $ 50,160     $ 4,131,681     $ (54,183)      $ (270)      $ (59,435)      $ 4,068,984  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

Disclosure of changes in number of shares:

  September 30,
2012
    December 31,
2011
    September 30,
2011
 

Preferred Stock:

     

Balance at beginning and end of period

    2,006,391       2,006,391       2,006,391  
 

 

 

   

 

 

   

 

 

 

Common Stock – Issued:

     

Balance at beginning of year

    102,634,640       102,292,916       102,292,916  

Issuance of stock

    477,665       341,724       194,110  
 

 

 

   

 

 

   

 

 

 

Balance at end of the period

    103,112,305       102,634,640       102,487,026  

Treasury stock

    (15,162     (44,183     (39,486
 

 

 

   

 

 

   

 

 

 

Common Stock – Outstanding

    103,097,143       102,590,457       102,447,540  
 

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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POPULAR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

     Nine months ended
September 30,
 

(In thousands)

   2012     2011  

Cash flows from operating activities:

    

Net income

   $ 161,335     $ 148,350  
  

 

 

   

 

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

    

Provision for loan losses

     326,130       395,912  

Amortization of intangibles

     7,605       6,973  

Depreciation and amortization of premises and equipment

     34,953       34,864  

Net accretion of discounts and amortization of premiums and deferred fees

     (22,118     (97,668

Impairment losses on net assets to be disposed of

     —          6,085  

Fair value adjustments on mortgage servicing rights

     7,217       26,373  

Fair value change in equity appreciation instrument

     —          (8,323

FDIC loss share expense (income)

     19,387       (49,344

Amortization of prepaid FDIC assessment

     30,157       68,640  

Adjustments (expense) to indemnity reserves on loans sold

     17,990       29,587  

Losses from investments under the equity method

     9,788       11,250  

Deferred income tax (benefit) expense

     (150,201     44,608  

(Gain) loss on:

    

Disposition of premises and equipment

     (8,253     (2,019

Early extinguishment of debt

     24,950       —     

Sale and valuation adjustments of investment securities

     285       (8,044

Sale of loans, including valuation adjustments on loans held-for-sale

     (18,569     (14,756

Sale of equity method investment

     —          (16,907

Sale of other assets

     (2,545     —     

Acquisitions of loans held-for-sale

     (288,844     (253,401

Proceeds from sale of loans held-for-sale

     242,088       101,549  

Net disbursements on loans held-for-sale

     (860,804     (617,591

Net (increase) decrease in:

    

Trading securities

     849,304       492,882  

Accrued income receivable

     (8,735     14,924  

Other assets

     65,944       (25,576

Net increase (decrease) in:

    

Interest payable

     (7,553     (7,344

Pension and other postretirement benefit obligation

     24,156       (128,802

Other liabilities

     (48,062     (109,155
  

 

 

   

 

 

 

Total adjustments

     244,270       (105,283
  

 

 

   

 

 

 

Net cash provided by operating activities

     405,605       43,067  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Net decrease (increase) in money market investments

     450,511       (289,844

Purchases of investment securities:

    

Available-for-sale

     (1,284,834     (1,198,613

Held-to-maturity

     (250     (65,358

Other

     (152,607     (116,582

Proceeds from calls, paydowns, maturities and redemptions of investment securities:

    

Available-for-sale

     1,166,618       979,868  

Held-to-maturity

     4,398       54,617  

Other

     119,098       104,231  

Proceeds from sale of investment securities:

    

Available-for-sale

     8,031       35,099  

Other

     —          2,294  

Net repayments on loans

     687,582       1,013,103  

Proceeds from sale of loans

     51,677       290,119  

Acquisition of loan portfolios

     (1,051,588     (985,675

Payments received from FDIC under loss sharing agreements

     327,739       561,111  

Cash paid related to business acquisitions

     —          (500

Net proceeds from sale of equity method investment

     —          31,503  

Mortgage servicing rights purchased

     (1,620     (1,251

Acquisition of premises and equipment

     (34,336     (37,868

Proceeds from sale of:

    

Premises and equipment

     20,612       12,314  

Other productive assets

     1,026       —     

Foreclosed assets

     142,019       133,017  
  

 

 

   

 

 

 

Net cash provided by investing activities

     454,076       521,585  
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Net increase (decrease) in:

    

Deposits

     (1,624,634     1,192,652  

Federal funds purchased and assets sold under agreements to repurchase

     (196,533     189,056  

Other short-term borrowings

     910,000       (198,022

Payments of notes payable

     (72,815     (2,055,254

Proceeds from issuance of notes payable

     61,331       419,500  

Proceeds from issuance of common stock

     7,788       5,394  

Dividends paid

     (2,482     (2,792

Treasury stock acquired

     (276     (418
  

 

 

   

 

 

 

Net cash used in financing activities

     (917,621     (449,884
  

 

 

   

 

 

 

Net (decrease) increase in cash and due from banks

     (57,940     114,768  

Cash and due from banks at beginning of period

     535,282       452,373  
  

 

 

   

 

 

 

Cash and due from banks at end of period

   $ 477,342     $ 567,141  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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Table of Contents

Notes to Consolidated Financial

Statements (Unaudited)

 

Note 1 - Organization, consolidation and basis of presentation

     10   

Note 2 - New accounting pronouncements

     11   

Note 3 - Restrictions on cash and due from banks and certain securities

     15   

Note 4 - Pledged assets

     16   

Note 5 - Investment securities available-for-sale

     17   

Note 6 - Investment securities held-to-maturity

     21   

Note 7 - Loans

     23   

Note 8 - Allowance for loan losses

     32   

Note 9 - FDIC loss share asset and true-up payment obligation

     57   

Note 10 - Transfers of financial assets and mortgage servicing assets

     58   

Note 11 - Other assets

     62   

Note 12 - Goodwill and other intangible assets

     62   

Note 13 - Deposits

     67   

Note 14 - Borrowings

     68   

Note 15 - Trust preferred securities

     70   

Note 16 - Stockholders’ equity

     72   

Note 17 - Accumulated other comprehensive income (loss)

     73   

Note 18 - Guarantees

     73   

Note 19 - Commitments and contingencies

     76   

Note 20 - Non-consolidated variable interest entities

     78   

Note 21 - Related party transactions with affiliated company / joint venture

     81   

Note 22 - Fair value measurement

     84   

Note 23 - Fair value of financial instruments

     92   

Note 24 - Net income per common share

     97   

Note 25 - Other service fees

     98   

Note 26 - FDIC loss share income (expense)

     98   

Note 27 - Pension and postretirement benefits

     99   

Note 28 - Stock-based compensation

     100   

Note 29 - Income taxes

     103   

Note 30 - Supplemental disclosure on the consolidated statements of cash flows

     107   

Note 31 - Segment reporting

     108   

Note 32 - Subsequent events

     114   

Note 33 - Condensed consolidating financial information of guarantor and issuers of registered guaranteed securities

     115   

 

9


Table of Contents

Note 1 – Organization, consolidation and basis of presentation

Nature of Operations

Popular, Inc. (the “Corporation”) is a diversified, publicly-owned financial holding company subject to the supervision and regulation of the Board of Governors of the Federal Reserve System. The Corporation has operations in Puerto Rico, the United States, the Caribbean and Latin America. In Puerto Rico, the Corporation provides retail and commercial banking services through its principal banking subsidiary, Banco Popular de Puerto Rico (“BPPR”), as well as mortgage banking, investment banking, broker-dealer, auto and equipment leasing and financing, and insurance services through specialized subsidiaries. In the U.S. mainland, the Corporation operates Banco Popular North America (“BPNA”), including its wholly-owned subsidiary E-LOAN. BPNA focuses efforts and resources on the core community banking business. BPNA operates branches in New York, California, Illinois, New Jersey and Florida. E-LOAN markets deposit accounts under its name for the benefit of BPNA. The BPNA branches operate under the name of Popular Community Bank. Note 31 to the consolidated financial statements presents information about the Corporation’s business segments.

Principles of Consolidation and Basis of Presentation

The consolidated interim financial statements have been prepared without audit. The consolidated statement of financial condition data at December 31, 2011 was derived from audited financial statements. The unaudited interim financial statements are, in the opinion of management, a fair statement of the results for the periods reported and include all necessary adjustments, all of a normal recurring nature, for a fair statement of such results.

Certain reclassifications have been made to the 2011 consolidated financial statements and notes to the financial statements to conform with the 2012 presentation.

On May 29, 2012, the Corporation effected a 1-for-10 reverse split of its common stock. The reverse split is described further in Note 16 to these consolidated financial statements. All share and per share information in the consolidated financial statements and accompanying notes have been adjusted to retroactively reflect the 1-for-10 reverse stock split.

Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from the unaudited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, these financial statements should be read in conjunction with the audited consolidated financial statements of the Corporation for the year ended December 31, 2011, included in the Corporation’s 2011 Annual Report (the “2011 Annual Report”). Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

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Table of Contents

Note 2 – New accounting pronouncements

FASB Accounting Standards Update 2012-06, Business Combinations (Topic 805): Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution (“ASU 2012-06”)

The FASB issued ASU 2012-06 in October 2012. ASU 2012-06 addresses the diversity in practice about how to interpret the terms “on the same basis” and “contractual limitations” when subsequently measuring an indemnification asset recognized in a government-assisted (Federal Deposit Insurance Corporation) acquisition of a financial institution that includes a loss-sharing agreement (indemnification agreement). When a reporting entity recognizes an indemnification asset as a result of a government-assisted acquisition of a financial institution and subsequently the cash flows expected to be collected on the indemnification asset changes, as a result of a change in cash flows expected to be collected on the assets subject to indemnification, the reporting entity should subsequently account for the change in the measurement of the indemnification asset on the same basis as the change in the assets subject to indemnification. Any amortization of changes in value should be limited to the contractual term of the indemnification agreement, that is, the lesser of the term of the indemnification agreement and the remaining life of the indemnified assets.

ASU 2012-06 is effective for fiscal years and interim periods within those years, beginning on or after December 15, 2012. Early adoption is permitted.

The adoption of this guidance is not expected to have a material effect on the Corporation’s consolidated financial statements.

FASB Accounting Standards Update 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment (“ASU 2012-02”)

The FASB issued ASU 2012-02 in July 2012. ASU 2012-02 is intended to simplify how entities test indefinite-lived intangible assets, other than goodwill, for impairment. ASU 2012-02 permits an entity the option to first assess qualitative factors to determine whether it is “more likely than not” that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with ASC Subtopic 350-30, Intangibles-Goodwill and Other-General Intangibles Other than Goodwill. The more-likely-than-not threshold is defined as having a likelihood of more than 50%. This guidance results in guidance that is similar to the goodwill impairment testing guidance in ASU 2011-08. The previous guidance under ASC Subtopic 350-30 required an entity to test indefinite-lived intangible assets for impairment on at least an annual basis by comparing an asset’s fair value with its carrying amount and recording an impairment loss for an amount equal to the excess of the asset’s carrying amount over its fair value. Under the amendments in this ASU, an entity is not required to calculate the fair value of an indefinite-lived intangible asset if the entity determines that it is not more likely than not that the asset is impaired. In addition the new qualitative indicators replace those currently used to determine whether indefinite-lived intangible assets should be tested for impairment on an interim basis.

ASU 2012-12 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual or interim impairment tests performed as of a date before July 27, 2012, as long as the financial statements have not yet been issued. The Corporation did not elect to adopt early the provisions of this ASU.

The provisions of this guidance simplify how entities test for indefinite-lived assets impairment and will not have an impact on the Corporation’s consolidated financial statements.

FASB Accounting Standards Update 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”) and FASB Accounting Standards Update 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05 (“ASU 2011-12”)

The FASB issued ASU 2011-05 in June 2011. The amendment of this ASU allows an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments to the Codification in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. This ASU also does not change the option for an entity to present components of other comprehensive income either net of related tax effects or before related tax effects, with one amount shown for the aggregate income tax expense or benefit related to the total of other comprehensive income items.

 

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Table of Contents

In December 2011, the FASB issued ASU 2011-12, which defers indefinitely the new requirement in ASU 2011-05 to present components of reclassification adjustments out of accumulated other comprehensive income on the face of the income statement by income statement line item.

The Corporation adopted the provisions of these two guidance in the first quarter of 2012. The guidance impacts presentation disclosure only and did not have an impact on the Corporation’s financial condition or results of operations.

FASB Accounting Standards Update 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”)

The FASB issued ASU 2011-11 in December 2011. The amendments in this ASU require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. To meet this objective, entities with financial instruments and derivatives that are either offset on the balance sheet or subject to a master netting arrangement or similar arrangement shall disclose the following quantitative information separately for assets and liabilities in tabular format: a) gross amounts of recognized assets and liabilities; b) amounts offset to determine the net amount presented in the balance sheet; c) net amounts presented in the balance sheet; d) amounts subject to an enforceable master netting agreement or similar arrangement not otherwise included in (b), including: amounts related to recognized financial instruments and other derivatives instruments if either management makes an accounting election not to offset or the amounts do not meet the guidance in ASC Section 210-20-45 or ASC Section 815-10-45, and also amounts related to financial collateral (including cash collateral); and e) the net amount after deducting the amounts in (d) from the amounts in (c).

In addition to these tabular disclosures, entities are required to provide a description of the setoff rights associated with assets and liabilities subject to an enforceable master netting arrangement.

An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented.

The provisions of this guidance impact presentation disclosure only and will not have an impact on the Corporation’s financial condition or results of operations.

FASB Accounting Standards Update 2011-10, Property, Plant, and Equipment (Topic 360): Derecognition of in Substance Real Estate-a Scope Clarification (“ASU 2011-10”)

The FASB issued ASU 2011-10 in December 2011. The objective of this ASU is to resolve the diversity in practice about whether the guidance in ASC Subtopic 360-20, “Property, Plant, and Equipment Real Estate Sales” applies to a parent that ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt. ASU 2011-10 provides that when a parent (reporting entity) ceases to have a controlling financial interest in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance in ASC Subtopic 360-20 to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would not satisfy the requirements to derecognize the in substance real estate before the legal transfer of the real estate to the lender and the extinguishment of the related nonrecourse indebtedness. That is, even if the reporting entity ceases to have a controlling financial interest under ASC Subtopic 810-10, the reporting entity would continue to include the real estate, debt, and the results of the subsidiary’s operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the debt.

ASU 2011-10 should be applied on a prospective basis to deconsolidation events occurring after the effective date; with prior periods not adjusted even if the reporting entity has continuing involvement with previously derecognized in substance real estate entities. For public entities, ASU 2011-10 is effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. Early adoption is permitted; however, the Corporation is not early adopting this ASU.

The adoption of this guidance is not expected to have a material effect on the Corporation’s consolidated financial statements.

FASB Accounting Standards Update 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment (“ASU 2011-08”)

 

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Table of Contents

The FASB issued ASU No. 2011-08 in September 2011. ASU 2011-08 is intended to simplify how entities test goodwill for impairment. ASU 2011-08 permits an entity the option to first assess qualitative factors to determine whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in ASC Topic 350, Intangibles-Goodwill and Other. The more-likely-than-not threshold is defined as having a likelihood of more than 50%. The previous guidance under ASC Topic 350 required an entity to test goodwill for impairment, on at least an annual basis, by comparing the fair value of a reporting unit with its carrying amount, including goodwill (step one). If the fair value of a reporting unit is less than its carrying amount, then the second step of the test must be performed to measure the amount of the impairment loss, if any. Under the amendments in this ASU, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.

This ASU also removes the guidance that permitted the entities to carry forward the calculation of the fair value of the reporting unit from one year to the next if certain conditions are met. In addition, the new qualitative indicators replace those currently used to determine whether an interim goodwill impairment test is required. These indicators are also applicable for assessing whether to perform step two for reporting units with zero or negative carrying amounts.

ASU 2011-08 was effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption was permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period had not yet been issued. The Corporation did not elect to adopt early the provisions of this ASU.

The Corporation adopted this guidance on January 1, 2012. The provisions of this guidance simplify how entities test for goodwill impairment and it has not impacted the Corporation’s consolidated financial statements as of September 30, 2012.

FASB Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU 2011-04”)

The FASB issued ASU 2011-04 in May 2011. The amendment of this ASU provides a consistent definition of fair value between U.S. GAAP and International Financial Reporting Standards (“IFRS”). The ASU modifies some fair value measurement principles and disclosure requirements including the application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity, measuring the fair value of financial instruments that are managed within a portfolio, application of premiums and discounts in a fair value measurement, disclosing quantitative information about unobservable inputs used in Level 3 fair value measurements, and other additional disclosures about fair value measurements.

The new guidance was effective for interim or annual periods beginning on or after December 15, 2011. The guidance should be applied prospectively and early application was not permitted.

The Corporation adopted this guidance on the first quarter of 2012. It has not had a material impact on the Corporation’s consolidated financial statements as of September 30, 2012. Refer to Notes 22 and 23 for additional fair value disclosures included for the quarter and nine months ended September 30, 2012.

FASB Accounting Standards Update 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements (“ASU 2011-03”)

The FASB issued ASU 2011-03 in April 2011. The amendment of this ASU affects all entities that enter into agreements to transfer financial assets that both entitle and obligate the transferor to repurchase or redeem the financial assets before their maturity. The ASU modifies the criteria for determining when these transactions would be accounted for as financings (secured borrowings / lending agreements) as opposed to sales (purchases) with commitments to repurchase (resell). This ASU does not affect other transfers of financial assets. ASC Topic 860 prescribes when an entity may or may not recognize a sale upon the transfer of financial assets subject to repurchase agreements. That determination is based, in part, on whether the entity has maintained effective control over transferred financial assets.

Specifically, the amendments in this ASU remove from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the requirement to demonstrate that the transferor possesses adequate collateral to fund substantially all the cost of purchasing replacement financial assets.

 

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Table of Contents

The new guidance was effective for interim or annual periods beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early application was not permitted.

The Corporation adopted this guidance on January 1, 2012. It has not had an impact on the Corporation’s consolidated financial statements as of September 30, 2012.

 

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Table of Contents

Note 3 – Restrictions on cash and due from banks and certain securities

The Corporation’s banking subsidiaries, BPPR and BPNA, are required by federal and state regulatory agencies to maintain average reserve balances with the Federal Reserve Bank of New York (the “Fed”) or other banks. Those required average reserve balances amounted to $900 million at September 30, 2012 (December 31, 2011—$838 million). Cash and due from banks, as well as other short-term, highly liquid securities, are used to cover the required average reserve balances.

At September 30, 2012, the Corporation held $38 million in restricted assets in the form of cash and funds deposited in money market accounts (December 31, 2011—$36 million).

.

 

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Table of Contents

Note 4 – Pledged assets

Certain securities and loans were pledged to secure public and trust deposits, assets sold under agreements to repurchase, other borrowings and credit facilities available, derivative positions, and loan servicing agreements. The classification and carrying amount of the Corporation’s pledged assets, in which the secured parties are not permitted to sell or repledge the collateral, were as follows:

 

(In thousands)

   September 30,
2012
     December 31,
2011
 

Investment securities available-for-sale, at fair value

   $ 1,757,309      $ 1,894,651  

Investment securities held-to-maturity, at amortized cost

     25,000        25,000  

Loans held-for-sale measured at lower of cost or fair value

     132        5,286  

Loans held-in-portfolio covered under loss sharing agreements with the FDIC

     476,061        —     

Loans held-in-portfolio not covered under loss sharing agreements with the FDIC

     8,544,687        8,571,268  
  

 

 

    

 

 

 

Total pledged assets

   $ 10,803,189      $ 10,496,205  
  

 

 

    

 

 

 

Pledged securities and loans that the creditor has the right by custom or contract to repledge are presented separately on the consolidated statements of financial condition.

At September 30, 2012, the Corporation had $ 1.3 billion in investment securities available-for-sale and $ 0.3 billion in loans that served as collateral to secure public funds (December 31, 2011—$ 1.4 billion and $ 0.4 billion, respectively).

At September 30, 2012, the Corporation’s banking subsidiaries had short-term and long-term credit facilities authorized with the Federal Home Loan Bank system (the “FHLB”) aggregating to $2.8 billion (December 31, 2011—$2.0 billion). Refer to Note 14 to the consolidated financial statements for borrowings outstanding under these credit facilities. At September 30, 2012, the credit facilities authorized with the FHLB were collateralized by $ 4.0 billion in loans held-in-portfolio (December 31, 2011—$ 3.2 billion). Also, the Corporation’s banking subsidiaries had a borrowing capacity at the Federal Reserve (“Fed”) discount window of $4.4 billion (December 31, 2011—$2.6 billion), which remained unused as of such date. The amount available under these credit facilities with the Fed is dependent upon the balance of loans and securities pledged as collateral. At September 30, 2012, the credit facilities with the Fed discount window were collateralized by $ 4.7 billion in loans held-in-portfolio (December 31, 2011—$ 4.0 billion). These pledged assets are included in the above table and were not reclassified and separately reported in the consolidated statements of financial condition.

In addition, at September 30, 2012 trades receivables from brokers and counterparties amounting to $267 million were pledged to secure repurchase agreements (December 31, 2011—$68 million).

 

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Table of Contents

Note 5 – Investment securities available-for-sale

The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of investment securities available-for-sale.

 

     At September 30, 2012  
            Gross      Gross             Weighted  
     Amortized      unrealized      unrealized      Fair      average  

(In thousands)

   cost      gains      losses      value      yield  

U.S. Treasury securities

              

Within 1 year

   $ 7,016      $ 43      $ —         $ 7,059        1.50

After 1 to 5 years

     27,423        3,225        —           30,648        3.82  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total U.S. Treasury securities

     34,439        3,268        —           37,707        3.35  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Obligations of U.S. Government sponsored entities

              

Within 1 year

     539,000        11,603        —           550,603        3.93  

After 1 to 5 years

     190,521        2,661        —           193,182        1.57  

After 5 to 10 years

     317,543        3,811        172        321,182        1.93  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of U.S. Government sponsored entities

     1,047,064        18,075        172        1,064,967        2.89  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Obligations of Puerto Rico, States and political subdivisions

              

Within 1 year

     5,220        43        —           5,263        5.26  

After 1 to 5 years

     6,262        169        42        6,389        4.65  

After 10 years

     37,290        1,062        —           38,352        5.38  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of Puerto Rico, States and political subdivisions

     48,772        1,274        42        50,004        5.27  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations—federal agencies

              

After 1 to 5 years

     5,506        51        —           5,557        1.49  

After 5 to 10 years

     45,831        2,067        —           47,898        2.96  

After 10 years

     2,116,579        48,324        1,316        2,163,587        2.35  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations—federal agencies

     2,167,916        50,442        1,316        2,217,042        2.36  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations—private label

              

After 5 to 10 years

     35        1        —           36        4.88  

After 10 years

     39,754        229        1,106        38,877        2.66  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations—private label

     39,789        230        1,106        38,913        2.66  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mortgage-backed securities

              

Within 1 year

     600        24        —           624        3.80  

After 1 to 5 years

     3,705        196        —           3,901        3.94  

After 5 to 10 years

     89,364        7,258        —           96,622        4.71  

After 10 years

     1,461,674        116,479        40        1,578,113        4.21  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage-backed securities

     1,555,343        123,957        40        1,679,260        4.24  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Equity securities (without contractual maturity)

     6,595        1,011        76        7,530        3.41  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other

              

After 5 to 10 years

     18,032        2,363        —           20,395        11.00  

After 10 years

     4,342        141        —           4,483        3.61  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other

     22,374        2,504        —           24,878        9.57  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities available-for-sale

   $ 4,922,292      $ 200,761      $ 2,752      $ 5,120,301        3.14
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     At December 31, 2011  
            Gross      Gross             Weighted  
     Amortized      unrealized      unrealized      Fair      average  

(In thousands)

   cost      gains      losses      value      yield  

U.S. Treasury securities

              

After 1 to 5 years

   $ 34,980      $ 3,688      $ —         $ 38,668        3.35
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total U.S. Treasury securities

     34,980        3,688        —           38,668        3.35  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Obligations of U.S. Government sponsored entities

              

Within 1 year

     94,492        2,382        —           96,874        3.45  

After 1 to 5 years

     655,625        25,860        —           681,485        3.38  

After 5 to 10 years

     171,633        2,969        —           174,602        2.94  

After 10 years

     32,086        499        —           32,585        3.20  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of U.S. Government sponsored entities

     953,836        31,710        —           985,546        3.30  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Obligations of Puerto Rico, States and political subdivisions

              

Within 1 year

     765        9        —           774        4.97  

After 1 to 5 years

     14,824        283        31        15,076        4.07  

After 5 to 10 years

     4,595        54        —           4,649        5.33  

After 10 years

     37,320        909        —           38,229        5.38  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of Puerto Rico, States and political subdivisions

     57,504        1,255        31        58,728        5.03  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations—federal agencies

              

After 1 to 5 years

     2,424        49        —           2,473        3.28  

After 5 to 10 years

     55,096        1,446        —           56,542        2.64  

After 10 years

     1,589,373        49,462        208        1,638,627        2.84  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations—federal agencies

     1,646,893        50,957        208        1,697,642        2.83  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations—private label

              

After 5 to 10 years

     5,653        1        181        5,473        0.81  

After 10 years

     59,460        —           7,141        52,319        2.44  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations—private label

     65,113        1        7,322        57,792        2.30  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mortgage-backed securities

              

Within 1 year

     57        1        —           58        3.91  

After 1 to 5 years

     7,564        328        —           7,892        3.86  

After 5 to 10 years

     111,639        8,020        1        119,658        4.66  

After 10 years

     1,870,736        141,274        49        2,011,961        4.25  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total mortgage-backed securities

     1,989,996        149,623        50        2,139,569        4.27  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Equity securities (without contractual maturity)

     6,594        426        104        6,916        2.96  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other

              

After 5 to 10 years

     17,850        700        —           18,550        10.99  

After 10 years

     6,311        101        —           6,412        3.61  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other

     24,161        801        —           24,962        9.06  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities available-for-sale

   $ 4,779,077      $ 238,461      $ 7,715      $ 5,009,823        3.58
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The weighted average yield on investment securities available-for-sale is based on amortized cost; therefore, it does not give effect to changes in fair value.

Securities not due on a single contractual maturity date, such as mortgage-backed securities and collateralized mortgage obligations, are classified in the period of final contractual maturity. The expected maturities of collateralized mortgage obligations, mortgage-backed securities and certain other securities may differ from their contractual maturities because they may be subject to prepayments or may be called by the issuer.

Proceeds from the sale of investment securities available-for-sale for the nine months ended September 30, 2012 were $ 8.0 million (September 30, 2011—$ 35.1 million). Gross realized gains and losses on the sale of investment securities available-for-sale were as follows:

 

     For the quarter ended September 30,     Nine months ended September 30,  

(In thousands)

   2012     2011     2012     2011  

Gross realized gains

   $ 65     $ 8,508     $ 65     $ 8,514  

Gross realized losses

     (1     (34     (350     (130
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gains (losses) on sale of investment securities available-for-sale

   $ 64     $ 8,474     $ (285   $ 8,384  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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The following tables present the Corporation’s fair value and gross unrealized losses of investment securities available-for-sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

 

     At September 30, 2012  
     Less than 12 months      12 months or more      Total  
            Gross             Gross             Gross  
     Fair      unrealized      Fair      unrealized      Fair      unrealized  

(In thousands)

   value      losses      value      losses      value      losses  

Obligations of U.S. Government sponsored entities

   $ 46,248      $ 172      $ —         $ —         $ 46,248      $ 172  

Obligations of Puerto Rico, States and political subdivisions

     752        9        2,032        33        2,784        42  

Collateralized mortgage obligations—federal agencies

     218,129        1,312        2,491        4        220,620        1,316  

Collateralized mortgage obligations—private label

     —           —           10,263        1,106        10,263        1,106  

Mortgage-backed securities

     204        4        787        36        991        40  

Equity securities

     1,852        64        49        12        1,901        76  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities available-for-sale in an unrealized loss position

   $ 267,185      $ 1,561      $ 15,622      $ 1,191      $ 282,807      $ 2,752  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     At December 31, 2011  
     Less than 12 months      12 months or more      Total  
            Gross             Gross             Gross  
     Fair      unrealized      Fair      unrealized      Fair      unrealized  

(In thousands)

   value      losses      value      losses      value      losses  

Obligations of Puerto Rico, States and political subdivisions

   $ 7,817      $ 28      $ 191      $ 3      $ 8,008      $ 31  

Collateralized mortgage obligations—federal agencies

     90,543        208        —           —           90,543        208  

Collateralized mortgage obligations—private label

     13,595        539        44,148        6,783        57,743        7,322  

Mortgage-backed securities

     5,577        14        1,466        36        7,043        50  

Equity securities

     5,199        95        2        9        5,201        104  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities available-for-sale in an unrealized loss position

   $ 122,731      $ 884      $ 45,807      $ 6,831      $ 168,538      $ 7,715  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Management evaluates investment securities for other-than-temporary (“OTTI”) declines in fair value on a quarterly basis. Once a decline in value is determined to be other-than-temporary, the value of a debt security is reduced and a corresponding charge to earnings is recognized for anticipated credit losses. Also, for equity securities that are considered other-than-temporarily impaired, the excess of the security’s carrying value over its fair value at the evaluation date is accounted for as a loss in the results of operations. The OTTI analysis requires management to consider various factors, which include, but are not limited to: (1) the length of time and the extent to which fair value has been less than the amortized cost basis, (2) the financial condition of the issuer or issuers, (3) actual collateral attributes, (4) the payment structure of the debt security and the likelihood of the issuer being able to make payments, (5) any rating changes by a rating agency, (6) adverse conditions specifically related to the security, industry, or a geographic area, and (7) management’s intent to sell the debt security or whether it is more likely than not that the Corporation would be required to sell the debt security before a forecasted recovery occurs.

At September 30, 2012, management performed its quarterly analysis of all debt securities in an unrealized loss position. Based on the analyses performed, management concluded that no individual debt security was other-than-temporarily impaired as of such date. At September 30, 2012, the Corporation did not have the intent to sell debt securities in an unrealized loss position and it is not more likely than not that the Corporation will have to sell the investment securities prior to recovery of their amortized cost basis. Also, management evaluated the Corporation’s portfolio of equity securities at September 30, 2012. No other-than-temporary impairment losses on equity securities were recorded during the quarter and nine months ended September 30, 2012 ($340 thousand recorded during the quarter and nine months ended September 30, 2011). Management has the intent and ability to hold the investments in equity securities that are at a loss position at September 30, 2012, for a reasonable period of time for a forecasted recovery of fair value up to (or beyond) the cost of these investments.

 

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The unrealized losses associated with “Collateralized mortgage obligations – private label” (“private-label CMO”) are primarily related to securities backed by residential mortgages. In addition to verifying the credit ratings for the private-label CMOs, management analyzed the underlying mortgage loan collateral for these bonds. Various statistics or metrics were reviewed for each private-label CMO, including among others, the weighted average loan-to-value, FICO score, and delinquency and foreclosure rates of the underlying assets in the securities. At September 30, 2012, there were no “sub-prime” securities in the Corporation’s private-label CMOs portfolios. For private-label CMOs with unrealized losses at September 30, 2012, credit impairment was assessed using a cash flow model that estimates the cash flows on the underlying mortgages, using the security-specific collateral and transaction structure. The model estimates cash flows from the underlying mortgage loans and distributes those cash flows to various tranches of securities, considering the transaction structure and any subordination and credit enhancements that exist in that structure. The cash flow model incorporates actual cash flows through the current period and then projects the expected cash flows using a number of assumptions, including default rates, loss severity and prepayment rates. Management’s assessment also considered tests using more stressful parameters. Based on the assessments, management concluded that the tranches of the private-label CMOs held by the Corporation were not other-than-temporarily impaired at September 30, 2012, thus management expects to recover the amortized cost basis of the securities.

The following table states the name of issuers, and the aggregate amortized cost and fair value of the securities of such issuer (includes available-for-sale and held-to-maturity securities), in which the aggregate amortized cost of such securities exceeds 10% of stockholders’ equity. This information excludes securities backed by the full faith and credit of the U.S. Government. Investments in obligations issued by a state of the U.S. and its political subdivisions and agencies, which are payable and secured by the same source of revenue or taxing authority, other than the U.S. Government, are considered securities of a single issuer.

 

     September 30, 2012      December 31, 2011  

(In thousands)

   Amortized cost      Fair value      Amortized cost      Fair value  

FNMA

   $ 1,372,644      $ 1,412,195      $ 1,049,315      $ 1,089,069  

FHLB

     528,814        540,766        553,940        578,617  

Freddie Mac

     1,257,159        1,281,095        984,270        1,010,669  

 

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Note 6 – Investment securities held-to-maturity

The following tables present the amortized cost, gross unrealized gains and losses, approximate fair value, weighted average yield and contractual maturities of investment securities held-to-maturity.

 

     At September 30, 2012  
            Gross      Gross             Weighted  
     Amortized      unrealized      unrealized      Fair      average  

(In thousands)

   cost      gains      losses      value      yield  

Obligations of Puerto Rico, States and political subdivisions

              

Within 1 year

   $ 7,420      $ 20      $ —         $ 7,440        2.63

After 1 to 5 years

     11,335        619        —           11,954        5.86  

After 5 to 10 years

     18,780        1,046        —           19,826        6.03  

After 10 years

     57,890        698        384        58,204        3.96  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of Puerto Rico, States and political subdivisions

     95,425        2,383        384        97,424        4.49  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations—federal agencies

              

After 10 years

     147        6        —           153        5.45  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations—federal agencies

     147        6        —           153        5.45  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other

              

Within 1 year

     250        —           —           250        1.05  

After 1 to 5 years

     26,250        25        —           26,275        3.41  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other

     26,500        25        —           26,525        3.39  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities held-to-maturity

   $ 122,072      $ 2,414      $ 384      $ 124,102        4.25
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     At December 31, 2011  
            Gross      Gross             Weighted  
     Amortized      unrealized      unrealized      Fair      average  

(In thousands)

   cost      gains      losses      value      yield  

Obligations of Puerto Rico, States and political subdivisions

              

Within 1 year

   $ 7,275      $ 6      $ —         $ 7,281        2.24

After 1 to 5 years

     11,174        430        —           11,604        5.80  

After 5 to 10 years

     18,512        266        90        18,688        5.99  

After 10 years

     62,012        40        855        61,197        4.11  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total obligations of Puerto Rico, States and political subdivisions

     98,973        742        945        98,770        4.51  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Collateralized mortgage obligations—private label

              

After 10 years

     160        —           9        151        5.45  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total collateralized mortgage obligations—private label

     160        —           9        151        5.45  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Other

              

After 1 to 5 years

     26,250        83        —           26,333        3.41  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total other

     26,250        83        —           26,333        3.41  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities held-to-maturity

   $ 125,383      $ 825      $ 954      $ 125,254        4.28
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Securities not due on a single contractual maturity date, such as collateralized mortgage obligations, are classified in the period of final contractual maturity. The expected maturities of collateralized mortgage obligations and certain other securities may differ from their contractual maturities because they may be subject to prepayments or may be called by the issuer.

The following tables present the Corporation’s fair value and gross unrealized losses of investment securities held-to-maturity, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2012 and December 31, 2011.

 

     At September 30, 2012  
     Less than 12 months      12 months or more      Total  
            Gross             Gross             Gross  
     Fair      unrealized      Fair      unrealized      Fair      unrealized  

(In thousands)

   value      losses      value      losses      value      losses  

Obligations of Puerto Rico, States and political subdivisions

   $ —         $ —         $ 19,161      $ 384      $ 19,161      $ 384  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities held-to-maturity in an unrealized loss position

   $ —         $ —         $ 19,161      $ 384      $ 19,161      $ 384  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     At December 31, 2011  
     Less than 12 months      12 months or more      Total  
            Gross             Gross             Gross  
     Fair      unrealized      Fair      unrealized      Fair      unrealized  

(In thousands)

   value      losses      value      losses      value      losses  

Obligations of Puerto Rico, States and political subdivisions

   $ 10,323      $ 92      $ 31,062      $ 853      $ 41,385      $ 945  

Collateralized mortgage obligations—private label

     —           —           151        9        151        9  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total investment securities held-to-maturity in an unrealized loss position

   $ 10,323      $ 92      $ 31,213      $ 862      $ 41,536      $ 954  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As indicated in Note 5 to these consolidated financial statements, management evaluates investment securities for OTTI declines in fair value on a quarterly basis.

The “Obligations of Puerto Rico, States and political subdivisions” classified as held-to-maturity at September 30, 2012 are primarily associated with securities issued by municipalities of Puerto Rico and are generally not rated by a credit rating agency. The Corporation performs periodic credit quality reviews on these issuers. The decline in fair value at September 30, 2012 was attributable to changes in interest rates and not credit quality, thus no other-than-temporary decline in value was necessary to be recorded in these held-to-maturity securities at September 30, 2012. At September 30, 2012, the Corporation does not have the intent to sell securities held-to-maturity and it is not more likely than not that the Corporation will have to sell these investment securities prior to recovery of their amortized cost basis.

 

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Note 7 – Loans

Covered loans acquired in the Westernbank FDIC-assisted transaction, except for lines of credit with revolving privileges, are accounted for by the Corporation in accordance with ASC Subtopic 310-30. Under ASC Subtopic 310-30, the acquired loans were aggregated into pools based on similar characteristics. Each loan pool is accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. The covered loans which are accounted for under ASC Subtopic 310-30 by the Corporation are not considered non-performing and will continue to have an accretable yield as long as there is a reasonable expectation about the timing and amount of cash flows expected to be collected. The Corporation measures additional losses for this portfolio when it is probable the Corporation will be unable to collect all cash flows expected at acquisition plus additional cash flows expected to be collected arising from changes in estimates after acquisition. Lines of credit with revolving privileges that were acquired as part of the Westernbank FDIC-assisted transaction are accounted for under the guidance of ASC Subtopic 310-20, which requires that any differences between the contractually required loan payment receivable in excess of the Corporation’s initial investment in the loans be accreted into interest income. Loans accounted for under ASC Subtopic 310-20 are placed in non-accrual status when past due in accordance with the Corporation’s non-accruing policy and any accretion of discount is discontinued.

The risks on loans acquired in the FDIC-assisted transaction are significantly different from the risks on loans not covered under the FDIC loss sharing agreements because of the loss protection provided by the FDIC. Accordingly, the Corporation presents loans subject to the loss sharing agreements as “covered loans” in the information below and loans that are not subject to the FDIC loss sharing agreements as “non-covered loans”.

For a summary of the accounting policy related to loans, interest recognition and allowance for loan losses refer to the summary of significant accounting policies included in Note 2 to the consolidated financial statements included in the 2011 Annual Report. Also, refer to Note 8 for a description of enhancements to the Corporation’s methodology for determining the allowance for loan losses which were effective on March 31, 2012.

The following table presents the composition of non-covered loans held-in-portfolio (“HIP”), net of unearned income, at September 30, 2012 and December 31, 2011.

 

 

     Non-covered loans      Non-covered loans  

(In thousands)

   HIP at September 30, 2012      HIP at December 31, 2011  

Commercial multi-family

   $ 932,434      $ 808,933  

Commercial real estate non-owner occupied

     2,643,533        2,665,499  

Commercial real estate owner occupied

     2,640,074        2,817,266  

Commercial and industrial

     3,412,590        3,681,629  

Construction

     258,453        239,939  

Mortgage

     6,022,422        5,518,460  

Leasing

     538,014        548,706  

Legacy[2]

     465,848        648,409  

Consumer:

     

Credit cards

     1,195,413        1,230,029  

Home equity lines of credit

     506,206        557,894  

Personal

     1,357,441        1,130,593  

Auto

     546,481        518,476  

Other

     234,944        236,763  
  

 

 

    

 

 

 

Total loans held-in-portfolio[1]

   $ 20,753,853      $ 20,602,596  
  

 

 

    

 

 

 

 

[1] Non-covered loans held-in-portfolio at September 30, 2012 are net of $97 million in unearned income and exclude $337 million in loans held-for-sale. (December 31, 2011 - $101 million in unearned income and $363 million in loans held-for-sale.)
[2] The legacy portfolio is comprised of commercial loans, construction loans and lease financings related to certain lending products exited by the Corporation as part of restructuring efforts carried out in prior years at the BPNA reportable segment.

 

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The following table presents the composition of covered loans at September 30, 2012 and December 31, 2011.

 

     Covered loans at      Covered loans at  

(In thousands)

   September 30, 2012      December 31, 2011  

Commercial real estate

   $ 2,153,790      $ 2,271,295  

Commercial and industrial

     170,572        241,447  

Construction

     393,101        546,826  

Mortgage

     1,106,851        1,172,954  

Consumer

     79,553        116,181  
  

 

 

    

 

 

 

Total loans held-in-portfolio

   $ 3,903,867      $ 4,348,703  
  

 

 

    

 

 

 

The following table provides a breakdown of loans held-for-sale (“LHFS”) at September 30, 2012 and December 31, 2011 by main categories.

 

     Non-covered loans  

(In thousands)

   September 30, 2012      December 31, 2011  

Commercial

   $ 17,696      $ 25,730  

Construction

     88,030        236,045  

Legacy

     3,107        468  

Mortgage

     228,216        100,850  
  

 

 

    

 

 

 

Total

   $ 337,049      $ 363,093  
  

 

 

    

 

 

 

During the quarter and nine months ended September 30, 2012, the Corporation recorded purchases (including repurchases) of mortgage loans amounting to $453 million and $1.1 billion, respectively (September 30, 2011—$177 million and $1.1 billion, respectively). Also, the Corporation recorded purchases of $230 million in consumer loans during the nine months ended September 30, 2012 (September 30, 2011—$130 million). In addition, during the quarter and nine months ended September 30, 2012, the Corporation recorded purchases of construction loans amounting to $0.1 million and $1 million, respectively, and none during 2011. There were no purchases of commercial loans during the quarter and nine months ended September 30, 2012 and 2011.

The Corporation performed whole-loan sales involving approximately $94 million and $238 million of residential mortgage loans during the quarter and nine months ended September 30, 2012, respectively (September 30, 2011- $39 million and $309 million, respectively). Also, the Corporation securitized approximately $ 181 million and $ 576 million of mortgage loans into Government National Mortgage Association (“GNMA”) mortgage-backed securities during the quarter and nine months ended September 30, 2012, respectively (September 30, 2011—$ 194 million and $ 667 million, respectively). Furthermore, the Corporation securitized approximately $ 107 million and $ 238 million of mortgage loans into Federal National Mortgage Association (“FNMA”) mortgage-backed securities during the quarter and nine months ended September 30, 2012, respectively (September 30, 2011- $ 42 million and $ 163 million, respectively). Also, the Corporation securitized approximately $ 20 million of mortgage loans into Federal Home Loan Mortgage Corporation (“FHLMC”) mortgage-backed securities during the quarter and nine months ended September 30, 2012. There were no securitizations into FHLMC for the quarter and nine months ended September 30, 2011. The Corporation sold commercial and construction loans with a book value of approximately $9 million and $48 million during the quarter and nine months ended September 30, 2012, respectively (September 30, 2011- $13 million and $27 million, respectively). In addition, during the third quarter of 2011, other construction and commercial loans held-for-sale with a combined book value of $128 million were sold to a joint venture in which the Corporation holds minority interest.

Non-covered loans

The following tables present non-covered loans held-in-portfolio by loan class that are in non-performing status or are accruing interest but are past due 90 days or more at September 30, 2012 and December 31, 2011. Accruing loans past due 90 days or more consist primarily of credit cards, FHA / VA and other insured mortgage loans, and delinquent mortgage loans which are included in the Corporation’s financial statements pursuant to GNMA’s buy-back option program. Servicers of loans underlying GNMA mortgage-backed securities must report as their own assets the defaulted loans that they have the option (but not the obligation) to repurchase, even when they elect not to exercise that option. Also, accruing loans past due 90 days or more include

 

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residential conventional loans purchased from another financial institution that, although delinquent, the Corporation has received timely payment from the seller / servicer, and, in some instances, have partial guarantees under recourse agreements. However, residential conventional loans purchased from another financial institution, which are in the process of foreclosure, are classified as non-performing mortgage loans.

 

At September 30, 2012

 
     Puerto Rico      U.S. mainland      Popular, Inc.  
     Non-covered loans                              
            Accruing             Accruing             Accruing  
     Non-accrual      loans past-due      Non-accrual      loans past-due      Non-accrual      loans past-due  

(In thousands)

   loans      90 days or more      loans      90 days or more      loans      90 days or more  

Commercial multi-family

   $ 24,031      $ —         $ 17,714      $ —         $ 41,745      $ —     

Commercial real estate non-owner occupied

     72,315        —           87,439        —           159,754        —     

Commercial real estate owner occupied

     361,955        —           38,789        —           400,744        —     

Commercial and industrial

     154,480        247        15,494        —           169,974        247  

Construction

     37,793        —           12,140        —           49,933        —     

Mortgage

     598,523        354,356        33,529        —           632,052        354,356  

Leasing

     4,837        —           —           —           4,837        —     

Legacy

     —           —           48,735        —           48,735        —     

Consumer:

                 

Credit cards

     —           21,648        483        —           483        21,648  

Home equity lines of credit

     —           170        10,436        —           10,436        170  

Personal

     19,982        3        1,671        —           21,653        3  

Auto

     7,731        —           8        —           7,739        —     

Other

     2,379        546        36        —           2,415        546  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total[1]

   $ 1,284,026      $ 376,970      $ 266,474      $ —         $ 1,550,500      $ 376,970  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[1] For purposes of this table non-performing loans exclude $ 109 million in non-performing loans held-for-sale.

 

At December 31, 2011

 
     Puerto Rico      U.S. mainland      Popular, Inc.  
     Non-covered loans                              
            Accruing             Accruing             Accruing  
     Non-accrual      loans past-due      Non-accrual      loans past-due      Non-accrual      loans past-due  

(In thousands)

   loans      90 days or more      loans      90 days or more      loans      90 days or more  

Commercial multi-family

   $ 15,396      $ —         $ 13,935      $ —         $ 29,331      $ —     

Commercial real estate non-owner occupied

     51,013        —           80,820        —           131,833        —     

Commercial real estate owner occupied

     385,303        —           59,726        —           445,029        —     

Commercial and industrial

     179,459        675        44,440        —           223,899        675  

Construction

     53,859        —           42,427        —           96,286        —     

Mortgage

     649,279        280,912        37,223        —           686,502        280,912  

Leasing

     5,642        —           —           —           5,642        —     

Legacy

     —           —           75,660        —           75,660        —     

Consumer:

                 

Credit cards

     —           25,748        735        —           735        25,748  

Home equity lines of credit

     —           157        10,065        —           10,065        157  

Personal

     19,317        —           1,516        —           20,833        —     

Auto

     6,830        —           34        —           6,864        —     

Other

     5,144        468        27        —           5,171        468  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total[1]

   $ 1,371,242      $ 307,960      $ 366,608      $ —         $ 1,737,850      $ 307,960  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

[1] For purposes of this table non-performing loans exclude $ 262 million in non-performing loans held-for-sale.

 

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The following tables present loans by past due status at September 30, 2012 and December 31, 2011 for non-covered loans held-in-portfolio (net of unearned income).

 

September 30, 2012

 

Puerto Rico

 

Non-covered loans

 
     Past due             Non-covered  
     30-59      60-89      90 days      Total             loans HIP  

(In thousands)

   days      days      or more      past due      Current      Puerto Rico  

Commercial multi-family

   $ 427      $ —         $ 24,031      $ 24,458      $ 94,829      $ 119,287  

Commercial real estate non-owner occupied

     4,694        1,174        72,315        78,183        1,261,421        1,339,604  

Commercial real estate owner occupied

     23,205        7,032        361,955        392,192        1,708,447        2,100,639  

Commercial and industrial

     18,513        5,183        154,727        178,423        2,445,862        2,624,285  

Construction

     1,040        —           37,793        38,833        171,923        210,756  

Mortgage

     249,917        112,807        952,879        1,315,603        3,603,282        4,918,885  

Leasing

     6,680        1,739        4,837        13,256        524,758        538,014  

Consumer:

                 

Credit cards

     15,644        10,174        21,648        47,466        1,133,339        1,180,805  

Home equity lines of credit

     47        241        170        458        16,788        17,246  

Personal

     14,467        8,615        19,985        43,067        1,172,033        1,215,100  

Auto

     25,302        7,319        7,731        40,352        505,170        545,522  

Other

     4,768        408        2,925        8,101        225,515        233,616  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 364,704      $ 154,692      $ 1,660,996      $ 2,180,392      $ 12,863,367      $ 15,043,759  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

September 30, 2012

 

U.S. mainland

 
     Past due                
     30-59      60-89      90 days      Total             Loans HIP  

(In thousands)

   days      days      or more      past due      Current      U.S. mainland  

Commercial multi-family

   $ 4,778      $ 1,693      $ 17,714      $ 24,185      $ 788,962      $ 813,147  

Commercial real estate non-owner occupied

     21,266        9,387        87,439        118,092        1,185,837        1,303,929  

Commercial real estate owner occupied

     2,819        —           38,789        41,608        497,827        539,435  

Commercial and industrial

     5,361        1,986        15,494        22,841        765,464        788,305  

Construction

     6,317        —           12,140        18,457        29,240        47,697  

Mortgage

     15,307        13,002        33,529        61,838        1,041,699        1,103,537  

Legacy

     7,484        6,222        48,735        62,441        403,407        465,848  

Consumer:

                 

Credit cards

     244        188        483        915        13,693        14,608  

Home equity lines of credit

     4,024        2,611        10,436        17,071        471,889        488,960  

Personal

     528        2,578        1,671        4,777        137,564        142,341  

Auto

     34        1        8        43        916        959  

Other

     3        13        36        52        1,276        1,328  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 68,165      $ 37,681      $ 266,474      $ 372,320      $ 5,337,774      $ 5,710,094  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

September 30, 2012

 

Popular, Inc.

 

Non-covered loans

 
     Past due             Non-covered  
     30-59      60-89      90 days      Total             loans HIP  

(In thousands)

   days      days      or more      past due      Current      Popular, Inc.  

Commercial multi-family

   $ 5,205      $ 1,693      $ 41,745      $ 48,643      $ 883,791      $ 932,434  

Commercial real estate non-owner occupied

     25,960        10,561        159,754        196,275        2,447,258        2,643,533  

Commercial real estate owner occupied

     26,024        7,032        400,744        433,800        2,206,274        2,640,074  

Commercial and industrial

     23,874        7,169        170,221        201,264        3,211,326        3,412,590  

Construction

     7,357        —           49,933        57,290        201,163        258,453  

Mortgage

     265,224        125,809        986,408        1,377,441        4,644,981        6,022,422  

Leasing

     6,680        1,739        4,837        13,256        524,758        538,014  

Legacy

     7,484        6,222        48,735        62,441        403,407        465,848  

Consumer:

                 

Credit cards

     15,888        10,362        22,131        48,381        1,147,032        1,195,413  

Home equity lines of credit

     4,071        2,852        10,606        17,529        488,677        506,206  

Personal

     14,995        11,193        21,656        47,844        1,309,597        1,357,441  

Auto

     25,336        7,320        7,739        40,395        506,086        546,481  

Other

     4,771        421        2,961        8,153        226,791        234,944  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 432,869      $ 192,373      $ 1,927,470      $ 2,552,712      $ 18,201,141      $ 20,753,853  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

December 31, 2011

 

Puerto Rico

 

Non-covered loans

 
     Past due             Non-covered  
     30-59      60-89      90 days      Total             loans HIP  

(In thousands)

   days      days      or more      past due      Current      Puerto Rico  

Commercial multi-family

   $ 435      $ 121      $ 15,396      $ 15,952      $ 107,164      $ 123,116  

Commercial real estate non-owner occupied

     16,584        462        51,013        68,059        1,193,447        1,261,506  

Commercial real estate owner occupied

     39,578        21,003        385,303        445,884        1,785,542        2,231,426  

Commercial and industrial

     46,013        17,233        180,134        243,380        2,611,154        2,854,534  

Construction

     608        21,055        53,859        75,522        85,419        160,941  

Mortgage

     202,072        98,565        930,191        1,230,828        3,458,655        4,689,483  

Leasing

     7,927        2,301        5,642        15,870        532,836        548,706  

Consumer:

                 

Credit cards

     14,507        11,479        25,748        51,734        1,164,086        1,215,820  

Home equity lines of credit

     155        395        157        707        19,344        20,051  

Personal

     17,583        10,434        19,317        47,334        935,854        983,188  

Auto

     22,677        5,883        6,830        35,390        480,874        516,264  

Other

     1,740        1,442        5,612        8,794        226,310        235,104  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 369,879      $ 190,373      $ 1,679,202      $ 2,239,454      $ 12,600,685      $ 14,840,139  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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December 31, 2011

 

U.S. mainland

 
     Past due                
     30-59      60-89      90 days      Total             Loans HIP  

(In thousands)

   days      days      or more      past due      Current      U.S. mainland  

Commercial multi-family

   $ 14,582      $ —         $ 13,935      $ 28,517      $ 657,300      $ 685,817  

Commercial real estate non-owner occupied

     15,794        3,168        80,820        99,782        1,304,211        1,403,993  

Commercial real estate owner occupied

     14,004        449        59,726        74,179        511,661        585,840  

Commercial and industrial

     22,545        3,791        44,440        70,776        756,319<